The Health Care M&A Monthly: Medical Device M&A Surges--

JNJ Leads Pack With $21.3 Billion Orthopedics Deal


April saw an upswing in M&A activity in the Medical Device sector, posting 11 transactions worth a combined total of $24.9 billion. These 11 deals covered acquisitions of businesses involved in orthopedics and biomarkers, implants and disease detection, imaging solutions and medical GPS systems. One, however, proved to be a real show-stopper. Johnson & Johnson (NYSE: JNJ) announced its $21.3 billion acquisition of Synthes GmbH (SWX: SYST), the Swiss orthopedics company. With the third largest medical device deal in history, JNJ has repositioned itself as the world’s largest orthopedics company.

Rumors of a deal began on April 14, and crescendoed with an announcement 10 days later. JNJ manufactures and markets a broad range of products in three areas of health care: consumer, pharmaceuticals and medical devices. On a trailing 12-month basis, JNJ generated revenue of $62.1 billion, EBITDA of $19.3 billion and net income of $12.3 billion.

Through five product groups (trauma, spine, cranio-maxillofacial, biomaterials and power tools), Synthes develops, manufactures and markets instruments, implants and biomaterials for the surgical fixation, correction and regeneration of the human skeleton and its soft tissues. Though domiciled in Switzerland—we assume for favorable tax treatment—SYST is headquartered in West Chester, Pennsylvania. (And, luckily, since it is not technically incorporated in Switzerland, the provisions of Swiss takeover law will not apply.) In 2010, the company generated revenue of $3.7 billion, and is on track to generate $3.9 billion in 2011.

It is believed that Synthes derives much of its competitive edge in the orthopedics industry from its partnership with The AO Foundation, a medically guided nonprofit organization based in Switzerland and led by an international group of surgeons who are experts in the treatment of trauma and disorder of the musculoskeletal system. Currently, The AO Foundation works exclusively for SYST in the areas of research and development. This allows SYST to tap into the Foundation’s network of over 10,000 surgeons, operating room personnel and scientists in over 100 countries who can be first researchers for, then customers of SYST...Want to read more? Click here for a free trial to The Health Care M&A Monthly and download the current issue today